Futures Slide Amid Credit Downgrade Fears

Futures were lower Tuesday after news personal spending in June declined for the first time since September 2009 and as a last-minute congressional deal to raise the U.S. debt ceiling failed to ease worries about a possible U.S. credit downgrade.

U.S. House of Representatives passed a legislation to raise the government’s borrowing limit beyond $14.3 trillion until 2013 and cut public spending by $2.1 trillion over the next decade.

The Senate is due to vote on the bill at noon New York time with lawmakers expected to pass the bill. However, concerns persist that the deal will still not prevent America from losing its triple-A credit rating.

On the economic front, consumer spending unexpectedly slid 0.2 percent in June to post the first decline since September 2009, after rising 0.1 percent in May, according to the Commerce Department, suggesting economic growth could remain weak in the third quarter.

Economists had expected spending to rise 0.2 percent, according to a Reuters poll.

The disappointing news follows a weak manufacturing news in the previous session and renewed concern over the European debt crisis helped to kill off the relief rally early as investors focused on fundamental concerns about the growth prospects for the U.S. economy.

Auto makers are also due to report sales for July.

On the earnings front, Pfizer reported profit and sales that edged expectations, but were still lower due to generic competition.

Meanwhile, Archer Daniels Midland slipped after the agricultural processor said earnings declined as a sharp jump in income tax expenses dragged on results.

In Europe, the spreads for Spanish and Italian credit default swaps rose to a new record on Tuesday and reports said that officials from the Italian government, Bank of Italy and market authorities are to meet to discuss the market turbulence.

European stocks were lower as several banks posted significant earnings losses and job cuts.

Barclays slipped after the bank said profits fell by a third and added it is cutting about 3,000 jobs this year. This comes after HSBC announced that it would be cutting up to 30,000 jobs worldwide.